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Millfield of dreams

Did Millfield’s business plan bear any resemblance to reality?

It was with some bemusement and incredulity that I read the comments made by Alan Easter about Millfield’s financial difficulties (Money Marketing, May 11).

While it may be felt that a trip to Dubai for top performers may be deserved, I have little doubt that the financial rewards they receive for the work they do are extremely generous, making the freebie holiday perhaps an unnecessary cherry on an otherwise very well-iced cake.

However, if the comments in the article are to be believed, the financial difficulties occurred after the trip had been paid for. I do not know about you but I find that a little difficult to believe. I have never before heard of a company going from financial well-being to being in very deep trouble in such a short space of time.

Even small companies can struggle on for a while, usually with some serious belt tightening going on, before they go to the wall. But apparently this has not been the case with Millfield.

Either some catastrophic event befell the firm or management have been living in a state of denial for some time. I suspect the latter. Easter himself admitted as much when he insisted the problem was down to ‘”very serious growing pains” and blamed the problems on Millfield’s “rapid growth” in the number of advisers over the past six years.

Eh? Two words. Business plan. To be able to spend so much of other people’s money, I am sure they had one – and no doubt a very good one, judging by how much money they have been given. I am just wondering if they ever looked at the business plan after they got the cash to see if it bore any resemblance to reality.

Millfield is not the first big IFA to get into financial difficulties. The phenomenon of the super-IFA eating up vast amounts of other people’s cash, with nothing to show for it apart from being able to say they have more advisers than anyone else, is not a new one. Millfield is unlikely to be the last unless some serious lessons are finally learned.

The product providers that invested in Millfield have said they will not write off the outstanding debt. However, your guess is as good as mine as to whether they will see much of their money again. The 15m quoted is fairly small beer for these guys although I am sure it represents a tidy sum to the millions of people who entrust them with investing their hard-earned cash and who ultimately pay their salaries. Perhaps if they keep that in mind, they might be more careful who they give money to.

But the fallout from such events is not just about the financial losses of the parties concerned. More important, it is about people’s livelihoods. I am sure many of the staff are feeling very uncertain about the future. What about the impact on clients? Are their best interests being taken care of?

There is also another aspect that we should not overlook, which is the damage to the IFA brand. What sort of message is given out when those entrusted with managing people’s money make such a complete and utter mess of managing their own finances?

As mentioned earlier, Millfield is not the first IFA business to get into difficulties and probably will not be the last. There is no way to prevent it happening again. Business myopia and stupidity unfortunately cannot be legislated against.

However, IFAs are not without power and can refuse to support such organisations by taking great care over the companies they choose to work for. A thorough going over of the accounts is a good starting point. Big loans are an obvious giveaway.

To quote David Harrison of Positive Solutions when responding to remarks made by Messrs Tebbutt and Chamberlain: “One of the purposes of a business is to make a profit. Neither of them has any experience of that.” Wise words…

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